Tuesday 18:20 GMT
US stocks climbed to record highs and the dollar resumed its upward momentum as a wave of optimism about the prospects for global growth swept through the markets.
French government bonds remained under pressure from political uncertainty ahead of the country’s presidential election. But Greek sovereign debt prices soared as the market priced in signs of progress by the nation’s creditors on resolving bailout tensions.
The positive showing for stock markets came as global purchasing managers’ indices pointed to “continued strong growth in advanced economies in February,” said Nikita Shah at Capital Economics.
“They are consistent with our view that global economic growth is set to pick up a bit this year.”
The standout report came from the eurozone, where the composite PMI rose to its highest level since April 2011.
“While investors have started to price in some political risk — as eurozone [yield] spreads have recently widened to pre-quantitative easing levels — businesses do not indicate similar uncertainty,” said Bert Colijn, senior eurozone economist at ING.
“In fact, strong employment growth, increased inflationary pressures and surging new orders are trumping any geopolitical uncertainty for the moment.”
Citi’s European economics team said the survey pointed to the strongest growth rates since the immediate recovery after the global financial crisis.
But Jonathan Stubbs, equity strategist at Citi, highlighted that net outflows from European equities over the past 12 months had been similar to those seen in 2008 at the height of the global financial crisis.
“There has been a good relationship between confidence in Europe’s economy — PMIs — and equity markets — net flows — over the last few years,” Mr Stubbs said. “This relationship has broken down in the last 12 months.
“This new confidence ‘gap’, we think, can largely be attributed to political risk.”
The energy sector led the way higher on Wall Street as oil prices rose to their highest for more than a week, while some strong results from leading retailers added to the upbeat mood.
The S&P 500 equity index was up 0.4 per cent at 2,359 by midday in New York as participants returned after a three-day break, after earlier hitting an all-time intraday peak of 2,366.24.
Walmart shares were up 3.3 per cent and Home Depot was 0.7 per cent higher.
In Europe, the pan-regional Stoxx 600 rose 0.6 per cent to its highest close since December 2015, while the Xetra Dax in Frankfurt jumped 1.2 per cent to a 22-month high.
The UK’s FTSE 100, however, slipped 0.3 per cent as banking heavyweight HSBC fell 6.5 per cent as its results disappointed.
Japan’s Topix rose 0.6 per cent as exporters received a boost from the weaker yen, but Australia’s S&P/ASX 200 eased 0.1 per cent and the soft showing by HSBC also hindered Hong Kong’s Hang Seng, which shed 0.8 per cent.
However, hopes that pension funds were buying the market, and that a number of companies had cancelled share sales, helped push China’s Shanghai Composite up 0.4 per cent to a near three-month high.
The French political worries and uncertainty about Greece kept the euro reined in.
The single currency was down 0.6 per cent against the dollar at $1.0549 and 0.7 per cent lower versus sterling at £0.8457.
The dollar was also up 0.4 per cent against the yen at ¥113.49, with some in the markets pointing to recent comments by Patrick Harker — president of the Federal Reserve Bank of Philadelphia and a voting member of the Fed’s Open Market Committee this year — suggesting that a March US rate rise remained a possibility.
The dollar index, a measure of the currency against a weighted basket of peers, was up 0.4 per cent at 101.37.
The yield on France’s 10-year government bond — which moves inversely to its price — rose 2 basis points to 1.09 per cent, although its spread over the equivalent-duration German Bund yield — flat at 0.30 per cent — remained short of Monday’s 54-month high above 81bp.
The 10-year US Treasury yield reversed an early rise to stand 1bp lower at 2.42 per cent — with some in markets suggesting the turnround was sparked by news that Ms Le Pen had extended her lead in a poll of first round voting intentions.
The Greek two-year yield, meanwhile, plunged 154bp to 8.18 per cent, according to Reuters data, after a meeting of eurozone finance ministers on Monday to discuss Greece’s bailout suggested some progress was being made.
Gold shrugged off the firm dollar as it pulled off an early low of $1,226 an ounce to trade flat at $1,237.
It was a strong session for oil prices, with Brent up 1.4 per cent at a two-week high of $56.99 a barrel amid hopes Opec was sticking to its recently agreed production cuts.
Additional reporting by Peter Wells in Hong Kong
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